NEW YORK—Americans pulled back their spending in January more than expected after the traditional holiday season splurge.
Retail sales fell 0.8 percent in January from the strong pace in December when they rose a revised 0.4 percent, according to the Commerce Department’s report on Thursday. Excluding sales at auto dealerships and gas stations, sales were down 0.5 percent. The decline was bigger than the 0.10 percent drop that economists expected and marked the lowest monthly figure since March of last year.
Economists had expected Americans to pull back on spending late last year under the weight of credit card debt and diminished savings. Yet despite those challenges, along with higher borrowing costs and elevated prices, household spending continues to be fueled by a strong jobs market and rising wages.
There was another surprising burst of hiring to start off 2024 as employers added 353,000 jobs in January, more evidence that the highest interest rates in two decades, intended to slow the economy, have yet to take hold.
But shoppers appeared to be slowing down their spending in January.
Business at clothing and accessory stores was down 0.2 percent. Sales at building materials and supplier suppliers fell 4.1 percent, reflecting a still weak housing market. Business at general merchandise stores was unchanged. Online sales fell 0.8 percent. Business at restaurants were up 0.7 percent.
Consumer inflation in the United States cooled last month yet remained high and the U.S. reported this week that consumer price index rose 0.3 percent from December to January. Compared with a year ago, prices are up 3.1 percent.
That’s far below the 9.1 percent inflation peak in mid-2022, but solidly above the Federal Reserve’s 2 percent target level at a time when public frustration with inflation has become a pivotal issue in President Joe Biden’s bid for re-election.
Major retailers including Walmart and Macy’s are slated to report financial results for the fiscal fourth quarter, which includes the critical holiday period, in the next few weeks.
The government’s monthly retail sales report offers only a partial look at consumer spending; it doesn’t include many services, including health care, travel and hotel lodging.
By Anne D’innocenzio
